When interest rates to go back to normal many more distressed sellers?

sellaconcepts

Really2 wrote: »

Why, Do you really think with an economy with no recovery raising rates would stop inflation.
In reality it would make it worse as GDP falls and the £ would slide further.

Inflation can't carry on without wages increasing, inflation is not out of control we have tax increases adding 1%+ on to last year and this year.
We have also see oil costs increase and food costs due to one of events.

Non of those can be controlled by the BOE, they could make a very short respite but that would be followed by falling GDP and a falling £.

So if the economy does not recover and real inflation keeps going up above the target then rates will have to go up anyway.

Thats a very bleak picture we are looking at.

Batchy

if interest rates are 0.5% and inflation is 3%... then they would be pretty stupid borrowing at those levels at 1% above base

Surely its expected that you only get a small margin when inflation is low and interest rates are NORMAL.

At the moment a normal mortgage rate is about 3% to 6%... if interest rates rise to 4% I would have thought the mortgage rates would only rise to 5% to 7%.

At the moment I fall into the 5% but in 2 years id expect to be in the 6%... its not the end of the world, and my year 1 pay increase will more than cover the increase in the mortgage rate from now.

Its relatively risk managed if you ask me.

This assumption is dependant on STABLE House prices, I still dont think we are there yet... but we are not far off... I do think we have reached stagnation!

RenovationMan

sellaconcepts wrote: »

So if the economy does not recover and real inflation keeps going up above the target then rates will have to go up anyway.

Thats a very bleak picture we are looking at.

Then they will change the target.

However, if the economy stays in the doldrums, then what will be driving domestic inflation?

sellaconcepts

RenovationMan wrote: »

Then they will change the target.

However, if the economy stays in the doldrums, then what will be driving domestic inflation?

Worldwide currency supply expanding. This is why everything is going up in price so much.

Really2

sellaconcepts wrote: »

So if the economy does not recover and real inflation keeps going up above the target then rates will have to go up anyway.

Thats a very bleak picture we are looking at.

So if it does not recover people will have less money to spend how does sustained inflation carry on without wages.

What does increasing rates then do to spending?

The inflation is not caused by excess money so how will any fiscal tightening do anything other than cause further falls in spending?

If someone can tell me how inflation can carry on without wages following I am all ears. I am more on the side that inflation will fall back again as people spend less, but that may be 12 months time becasue of the VAT increase.

Really2

sellaconcepts wrote: »

Worldwide currency supply expanding. This is why everything is going up in price so much.

Are you shore it is not down to tax increases, oil increases (increased demand due to partial recovery) and some crop failures?

Not seeing europe, America and Japan etc all got spiraling wage inflation?

RenovationMan

sellaconcepts wrote: »

Worldwide currency supply expanding. This is why everything is going up in price so much.

How will increasing UK interest rates solve this?

Batchy

RenovationMan wrote: »

Then they will change the target.

However, if the economy stays in the doldrums, then what will be driving domestic inflation?

The fact is, you have to have trust in the government and civil workers, that they can manage the economy correctly.

I think they are doing a fine job...

However, I DO think inflation is a risk, im seeing the effects at work now, take it or leave it, well above inflation increases, due to the volume and the nature of the market, its only a matter or time before it really feeds through to the supermarket etc.

chucky

lemonjelly wrote: »

I think it is a little naieve to expect that bank rates will not at least match BoE rises on the way up, even though they did not match them on the way down.

why do you think it is naive?

mbga9pgf

sellaconcepts wrote: »

Worldwide currency supply expanding. This is why everything is going up in price so much.

Take a look at UK M4. It isnt.

Credit destruction and writedowns are still the watchword.